Paragon Banking Share Discussion Threads

[the drewster] 22/9/2011 11:55

I think there is sufficient fear going forwards to drive these lower ... how much lower, well, there's the question.
For now, I would be a buyer at 120 (in the absence of other negative news!)

[future financier] 21/9/2011 12:17

Landlords are nothing if not realists on the matter of achievable rents - so they won't push tenants too hard whilst they (the landlords) are absolutely coining it.

Just look at the securitisation statistics on arrears!

[the drewster] 16/9/2011 08:54

Rent rises hitting the news ... could be good for landlords, though I suspect the arrears levels will start to climb steeply and actually, this may be very bad news indeed as it pushes families over the (financial) edge, and landlords have all the costs of evictions, without the income as the arrears and eviction process follows its natural path.

[the drewster] 15/9/2011 17:21

And with the unsuccessful attempt to break through 160, I'd suggest we have a new temporary (at least) ceiling

[the drewster] 14/9/2011 08:23

Net of free cash it certainly looks cheap ... but the leaky nature tells you something is fundamentally wrong.

Share price movements in the past have been uncanny in their accuracy of what might be going on behind the scenes. Be careful.

[future financier] 13/9/2011 13:03

I haven't looked at PAG for a couple of months and couldn't believe the current share price when I saw it!

Long term readers of this thread will know that I am at heart a bull for PAG - but that I sold out last December. But at around 140p it must be a snip - probably. The two major negatives I can think of are:

(1) They are failing to write even a quarter of the level of new business that they need to restore PAG's long term future; and

(2) They have not yet announced a new securitisation (probably due to failure in (1)).

On the new business there is no action being taken to remedy the situation - they are like rabbits caught in the headlights. Is this because their hands are tied under the terms of the warehouse facility? Or have they lost their "mojo"?

There is however nothing wrong with their back book of business that is delivering stellar returns to PAG. So either they will get their act together or else somebody somewhere will realise what a bargain PAG is and buy it.

And that is what I will probably do (in a small way!).

[the drewster] 13/9/2011 10:55

It would appear the downtrend is re-establishing itself.
Not particularly keen to go short at this price though.

[the drewster] 07/9/2011 15:16

still potential Head and Shoulders chart pattern forming. Volume and movement over the next few days would confirm. Otherwise I suggest the price may track lower, possibly significantly lower.
120 would seem a nice entry point.

[techno20] 02/9/2011 22:24

Note Cazanove re-iterated £2.10 target today.

Still plenty of scope for regaining lost ground.

[the drewster] 31/8/2011 15:10

Inverse head and shoulders could see this test 200 again quite quickly.

Alternatively, a failed back test of 155 could easily confirm the downtrend.

Fascinating watching, wish I had bought a few though!

[the drewster] 30/8/2011 21:52

Financials are not exactly "in favour" just now, so I wouldn't be too worried about not being able to get in cheaper just yet.

[techno20] 30/8/2011 18:08

Held back 1st thing this morning, thinking it would drop back, but instead it steamed ahead.

Let's hope this is the start of a re-rating.

[the drewster] 30/8/2011 08:43

Strong start to the week. Another false dawn, or will this be the start of some sort of recovery in value?

[techno20] 29/8/2011 10:37

Going to take the offer and top up (again!) tomorrow.

National Landlords Association reported last week the highest level of positive sentiment amongst landlords for 4 years. We are seeing a fundamental shift in attitudes towards, and the provision of, privately rented property and there is no-one better placed to exploit this than Paragon.

Sell-off well overdone.

[chri5 wright] 28/8/2011 17:36

anyone want to buy a £ 1 for 60p?

[yupawiese2010] 26/8/2011 19:03

At least somebody has got faith with PAG.




BULL POINTS:
■ Strong demand for buy-to-let mortgages
■ Shares trade far below net assets
■ Impairment levels consistently below industry average
■ Safe dividend
BEAR POINTS:
■ Exposed to investors' worst fears
■ Relies on a functioning securitisation market
It's fairly predictable that, if there is going to be stock market mayhem, then shares in Paragon will suffer. The company is, after all, exposed to the factors that still spook investors - the wholesale money markets, housing finance and house prices. That's why its share price has tumbled 27 per cent in the past five weeks. And yet nothing much has changed for Paragon.
IC TIP RATING
Tip style Value
Risk rating Medium
Timescale Long term
What do these mean? Find out in our guide to tip ratings
Indeed, rising demand for rented accommodation from people who can't get the finance to buy their own home is playing straight into Paragon's hands, because lending money to landlords is the group's bread and butter. The biggest risk it faces is a squeeze on wholesale lending and the shutters being pulled down on the securitisation market. Paragon needs to raise wholesale funds to lend on to customers, and it succeeded last year in securing a £200m warehouse facility. Once a decent amount of this is lent out, the loans are bundled together and used as collateral to issue bonds, and the proceeds are used to top up the warehouse facility.
True, the economic outlook is getting gloomy again, but the triple-A notes in a mortgage securitisation are pretty secure. Credit rating agencies stress-test mortgage packages to ensure that interest payments would still be met even if there were a 40 per cent drop in house prices and a rise in defaults to 20 per cent.
Besides, Paragon has already weathered the storm that started with the collapse of Northern Rock. As credit markets dried up and securitisation became a dirty word, Paragon battened down the hatches and set about maintaining shareholder value and preserving cash. Both of these were made easier by its conservative lending criteria. This approach has served it well, and impairment provisions as a percentage of its loan book were just 0.2 per cent in March, well below the industry average. Loan-to-value rates are kept low, typically at around 75 per cent, while Paragon adopts a hands-on approach to a landlord who faces difficulties. First, there will still be a stream of rental income, and management will ensure that this is used to service the mortgage debt. As a last resort, the property itself can be claimed and, thanks to the modest loan-to-value ratio at which Paragon lends, it is usually worth more than the outstanding mortgage.
THE PARAGON GROUP OF COMPANIES (PAG)
ORD PRICE: 145p MARKET VALUE: £434m
TOUCH: 144-145p 12-MONTH HIGH: 207p LOW: 124p
DIVIDEND YIELD: 3% PE RATIO: 8
NET ASSET VALUE: 239p
Year to 30 Sep Pre-tax profit (£m) Earnings per share (p) Dividend per share (p)
2008 53.7 17.9 3.0
2009 54.3 13.9 3.3
2010 71.8 18.3 3.6
2011* 78.0 18.7 4.0
2012* 79.4 19.3 4.4
% change +2 +3 +10
Normal market size: 8,000
Matched bargain trading
Beta: 1.1
*Peel Hunt estimates (profits and earnings not comparable with historic figures)
Paragon's financial health is also becoming more robust - its 'free' cash (ie, not pledged to a securitisation) rose from £128m to £180m in the year to the end of March. Furthermore, shareholders' funds amount to £715m or 239p a share, which means that the shares currently trade at 40 per cent below their underlying asset value, most of which is underpinned by bricks and mortar.
SHARE TIP SUMMARY:
Buy
Shares in Paragon are trading at a 12-month low and are rated at just eight times forecast earnings for 2011-12

[the drewster] 25/8/2011 14:18

Yes, only release Q3 end of July, so next will be the close statement (if they make one) or the actual results announcement.

In the meantime, any news of earnings enhancing acquisitions (of companies or of loan books) or of actually getting away a Securitisation deal, and there could be some significant upside form here.

Alas, I still worry that something is wrong and as usual, the shareprice reacts well in advance of the actual news with PAG.

[sat69] 24/8/2011 22:39

Cheers Yupa. I've amended the header.

[yupawiese2010] 24/8/2011 22:28

Sat69.

The next earnings report is not expected until the week commencing Nov 22nd

[techno20] 23/8/2011 15:15

Took the plunge yesterday and bought more at 1.42 The same amount I sold a few weeks back at 1.99.

Don't agree re securitisation - the fundamentals are about the quality of origination, which remains strong. There are still plenty of investors out there.

With 2.40+ in NAV, in my view the upside is considerably greater than downside. At these levels it might also attract some private equity interest.

[m.t.glass] 23/8/2011 10:39

Good luck TD. I still have my downbet open, for now.

[the drewster] 23/8/2011 08:37

The current malaise in the markets will surely make getting a new securitisation through virtually impossible?

Maybe that's the reason for the fall.

Existing operations with minimal growth appear to guarantee £80m profit for the year though, so hovvering over the buy button for a short term punt with a very tight stop!

[sat69] 21/8/2011 21:13

Q3 results next week?

[techno20] 21/8/2011 21:06

Other thought is a bid for mortgage serviced HML. Would be more manageable size wise and build on recent outsourcing success. HML sale is supposed to be imminent.

[techno20] 20/8/2011 21:11

Drewster - been thinking about your comments re. Leaks.

Only thing I can think of is the fact that the CHL sale seems to be progressing. A hugely dilutive rights??

Seems unlikely given the 30% drop in the share price, but you never know. Still planning to increase holding on Monday.

Techno